Shell suffers burning loss

London - Anglo-Dutch energy giant Royal Dutch Shell said on Thursday it made a net loss of $2.81bn in the final quarter of 2008 as plunging oil prices slashed the value of inventories.

The loss compared with net profit of $8.47bn during the fourth quarter of 2007 when crude prices were far higher, Europe's largest oil company said in a statement.

"During the fourth quarter 2008 worldwide oil and gas related commodity marker prices declined significantly," Shell said.

"As a consequence, net working capital decreased by some $15bn during the fourth quarter 2008, mainly due to the lower valued inventory in oil products" held by the group.

Shell's earnings were battered badly in the three months, with oil prices slumping to near five-year lows below $33 a barrel as the global economic slowdown curbed demand for energy.

The sharp drop in prices came after oil struck historic highs above $147 in July as the markets focused on simmering geopolitical tensions in major crude exporters Iran and Nigeria.

Shell said that fourth quarter earnings were also hit by lower production volumes in the United States and higher exploration costs.

The group's overall oil output dipped slightly during the fourth quarter to 3.415 million barrels per day and was down 2% in 2008.

For the year, net profit dropped 16 percent to $26.28bn even as revenue jumped 29% to $458bn. In the fourth quarter alone, however, sales fell by almost a quarter to $81bn.

"We delivered satisfactory performance in the fourth quarter of 2008 given the pressure on demand for oil and gas due to a weaker global economy," chief executive Jeroen van der Veer said.

"Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability. Industry conditions remain challenging and we are continuing the focus on capital and cost discipline in Shell," he said in the statement.

Excluding changes to the value of its oil inventories, Shell said net profit dropped 28% to $4.79bn in the fourth quarter but was up 14% to $31.37bn for 2008.

Following the data, Shell's 'A' share price showed a loss of 0.90% at 1,760 pence in early London trade. The capital's FTSE 100 index of leading shares was down 1.03% at 4,251.13 points.

Shell's results "should be seen as accomplished and reassuring in what was a very volatile quarter," said Peter Hutton, analyst at NCB Stockbrokers.

"We expect Shell to give some focus on the continued difficulties from the economic environment but to address their strengths to maintain course.

Shell remains a top pick in the sector "and we reiterate (our advice to) buy (its stock) on these positive results," he added in a research note to clients.

- AFP